Finra Hits High-Turnover Broker with Excessive Trading Sanction
The era of rogue brokers is not extinct.
Between July 2016 and November 2018, Frank Venturelli’s trading caused three customers to lose $373,226 while generating $169,803 in commissions for him and his now-defunct firm, First Standard Financial Co., the Financial Industry Regulatory Authority charged in a letter of acceptance, waiver and consent accepted by the broker.
In a sign of the broker’s unreasonable activities, Finra contrasted the turnover rate and cost-to-equity ratios he generated in the three accounts with industry standards.
“A turnover rate of six, or a cost-to-equity ratio above 20 percent generally indicates that excessive trading has occurred,” Finra wrote. Venturelli’s turnover rates were 60.57, 30.29 and 40.06 in the three accounts, and the annualized cost-to-equity ratios were 146.53%, 88.18% and 105.89%.
“[I]t was virtually impossible for any of these customers to earn a profit,” Finra said.
In addition to the excessive trading, the trades were unsuitable for the customers’ investment profiles, the regulator said.
Venturelli, who was not fined and ordered to pay only partial restitution because he demonstrated a “limited ability to pay,” will not be able to re-register with Finra until the $35,000 is paid, according to the consent letter.
The former broker accepted the settlement without admitting or denying the findings. His lawyer, Timothy Feil of Carmel, Milazzo & Feil LLP in New York, said Venturelli is pleased to have resolved the matter but declined further comment.
New Jersey’s Bureau of Securities revoked First Standard’s brokerage license in November, and obtained a court-ordered freeze of its assets. The firm “served as a haven for greedy, dishonest agents who traded clients’ accounts like sharks in a feeding frenzy,” Bureau Chief Christopher W. Gerold said at the time.
The firm and its 44 brokers earned more than $28.7 million in 2018 through “pervasive unauthorized, unsuitable and excessive trading,” according to the state, and many of its brokers shifted to other firms in 2019.
After he left the firm last September, Venturelli worked at Arive Capital Markets in Bay Ridge, Brooklyn, for three months. His registration there expired last December, according to BrokerCheck.
The database lists a single pending customer complaint from 2019 seeking $50,000 over excessive trading.
Venturelli “vehemently denies” the allegations, he commented in the database, calling the complaint “clearly erroneous” and warning that he would “seek expungement relief at the earliest opportunity.”
Finra in March barred First Standard’s former chief compliance officer, Michael Leahy, from acting as a supervisory principal at a brokerage firm. At least three former First Standard brokers who declined to cooperate with Finra investigations also have been barred.